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Student Loan Debtors Running Out of Consolidation Options

The Department of Education is rapidly becoming the only student loan consolidation option for new graduates, The Pittsburgh Tribune-Review reports today.  The article noted that many lenders, including Sallie Mae, which I reported on previously, have suspended their consolidation programs because in the current credit climate, they say, it is no longer economical:

The Pennsylvania Higher Education Assistance Agency, PHEAA, suspended its consolidation program in February. Sallie Mae, Nelnet and Next Student – all among the top 10 consolidators in 2007 — followed suit. Of the top 100 consolidators, 68 have suspended consolidations, said Mark Kantrowitz of Cranberry, publisher of FinAid, an online resource about financial aid…

In July 2006, federal loans began to carry a fixed 6.8 percent interest rate, so there are now fewer benefits to consolidating, and it’s more expensive for lenders, said Martha Holler, a spokeswoman for student loan lender Sallie Mae.

“It’s just not economical to make these loans,” she said. “The current credit crisis; the turbulence in the capital markets would have to settle down (in order for Sallie Mae to resume consolidation loans.)”

This might not be such a big deal except that many private and state loans are ineligible for consolidation through the Department of Education, which means that consolidating doesn’t necessarily come with one of its biggest benefits anymore – one monthly payment instead of several.

  1. November 18, 2008 at 9:48 am

    we have been discussing such a crisis today. where is the bail out for all the student loan debtors?

  2. November 18, 2008 at 11:52 am

    Government, even if reformed, is no the answer. Philanthropy coupled with technology has the potential to remedy the ailing student loan program in America. You are right, everyone is focused on the mortgage credit crunch, yet fails to realize that there are over $350B in student loans outstanding currently. The America people contributed $1B to their Presidential cnadidates, mostly small online donations, so why can’t we push for those very individuals to step in and begin donating to bring about real social change in America?

  1. December 1, 2008 at 6:17 pm

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